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(Wp 2010-10) Assessing The Predictive Power Of Labor-Market Indicators Of Inflation, Farrokh Nourzad
(Wp 2010-10) Assessing The Predictive Power Of Labor-Market Indicators Of Inflation, Farrokh Nourzad
Economics Working Papers
This paper examines two different measures of wages as predicators of prices in a vector error-correction framework using quarterly data for the U.S. for the period from 1947.Q1 through 2008.Q1. Based on cointegration and a series of exogeneity tests, it is found that: 1) there is a stable, long-run relationship between the Consumer Price Index (CPI) and the Personal Consumption Expenditure Deflator (PCED) on the one hand and unit labor costs (ULC) and average earnings per unit of output (AHE) on the other; 2) ULC is weakly exogenous for both price indices while the two price indices are weakly exogenous …